Bombardier

Christopher Xavier Torpey

November 14, 2013

GB-617.601

Bombardier: Canada vs. Brazil at the WTO

Bombardier Inc. of Canada, and Embraer Inc. of Brazil, are competing corporations in the aerospace division, and are currently embroiled in an international dispute over government involvement in their respective corporations. Bombardier bought out Canadair Corporation in 1986 from the Canadian government, and soon became the third largest civil aircraft manufacturer in the world behind its innovative regional jet aircraft. Embraer was formed via a presidential decree in 1969, and in 1994, Embraer was privatized, entered the regional jet market, and became the largest aeronautics company of any emerging market. Since Embraer has emerged as a global player, the two corporations have gone head to head, challenging one another not only for contracts, but in the courthouse of the World Trade Organization.

In 1996, Robert Brown, CEO of Bombardier Inc., became increasingly worried by their emerging rival, Embraer, specifically of the advantages that the Brazilian government provided to Embraer. Bombardier accused Brazil of providing Embraer with illegal subsidizes, thus establishing a significant market advantage. The subsidies were issued by PROEX, an export financing program run by BNDES, whom provided subsidized interest rates 3.8% below the market rate with a 15 year term. Bombardier considered several options in how to proceed, as they wanted to even the playing field but did not want to upset the Canadian constituency by asking for further funding and subsidies to match that of Embraer. After considering several options, Bombardier decided to bring a case in front of the WTO, the only multilateral organization with the ability to sanction the use of retaliatory trade duties. For this to happen, Bombardier needed the support of the Canadian government; WTO’s rules state that only governments of member countries are able to bring forth matters for adjudication,...